Interest rate linkages: a Kalman filter approach to detecting structural change

Barassi, Marco; Caporale, Guglielmo Maria; Hall, Stephen G.

doi:10.1016/j.econmod.2003.12.005

Cited by 29 publications

(39 citation statements)

References 26 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Based on forecast error variance decompositions, he argues that European markets are generally independent. Barassi et al (2005) provide evidence for pair-wise cointegration of the 3-month Treasury bill rates of all G-7 countries. They further estimate timevarying speed of adjustment coefficients in bivariate vector error correction models (VECM) with data from 1980 to 1998 using state-space modelling techniques (Kalman filter).…”

Section: Literature Reviewmentioning

confidence: 97%

Credit risk-free sovereign bonds under Solvency II: a cointegration analysis with consistently estimated structural breaks

Ludwig

2014

Applied Financial Economics

View full text Add to dashboard Cite

European insurance and reinsurance undertakings are facing the advent of a new regulatory framework. In the current proposal for its technical specifications under the pillar 1 standard formula, sovereign debt of European Union (EU) member states is treated as risk-free. This article examines the validity of this assumption for 26 EU member states. Taking into account the possibility of multiple structural breaks, we find evidence for the convergence of government bond yields of several countries with the yields of a risk-free asset. For the majority of countries, however, there is no such evidence. A detailed discussion of regime shifts in relation to European bond market integration is provided. Our findings have important implications for insurance companies, bond investors and regulators alike.

show abstract

Section: Literature Reviewmentioning

confidence: 97%

Credit risk-free sovereign bonds under Solvency II: a cointegration analysis with consistently estimated structural breaks

Ludwig

2014

Applied Financial Economics

View full text Add to dashboard Cite

show abstract

“…In particular, the TVP serves well in capturing the influence of external shocks that are diffuse in nature, such as in the case of the evolution of landowners' investment behavior in tree planting. The approach has been applied to various economic issues, such as tourism demand (Song and Wong, 2003), milk supply (Komaki and Penzer, 2005), and interest rate (Barassi et al, 2005).…”

Section: State Space Model With Time-varying Parametersmentioning

confidence: 99%

Variation of federal cost-share programs in the United States and the inducement effects on tree planting

Sun

2007

JFE

View full text Add to dashboard Cite

A long existing question associated with federal cost-share programs in the United States has been whether these public subsidies have induced or substituted for landowners' private investment in tree planting. This study reexamined the relationship between public funding and private investment behavior in the past 50 years by employing a state space model with time-varying parameters. Three regions, i.e., the South, North, and West were formed and compared. The analysis revealed that the relationship has changed over time and across regions and both inducement and substitution effects have occurred. The inducement effect occurred in the South from 1960 to 1972 and in the West from 1961 to 2002 while the substitution effect was present for all other years in the South and West. In the North, there has been a strong substitution effect from

show abstract

“…Table 2 shows the averaged (over all 1000 simulated time series) mean vector of squared standardized one-step forecast errors (MSSE (1) ), for each of the three models (LL, LT, SE) and for each of Σ (Σ 1 , Σ 2 , Σ 3 ). For comparison purposes, (2) and this demonstrates the accuracy of the estimator S t . We observe that under Σ 3 , the MSSE (1) has values significantly smaller than 1 as compared to the MSSE (2) using the true value of Σ 3 .…”

Section: Simulation Studies Empirical Convergence Of S Tmentioning

confidence: 99%

“…For comparison purposes, (2) and this demonstrates the accuracy of the estimator S t . We observe that under Σ 3 , the MSSE (1) has values significantly smaller than 1 as compared to the MSSE (2) using the true value of Σ 3 .…”

Section: Simulation Studies Empirical Convergence Of S Tmentioning

confidence: 99%

“…A review of recent developments of state space models in econometrics can be found in Pollock (2003). Barassi et al (2005) and Gravelle and Morley (2005) give applications of the Kalman filter to interest rates data and Harvey et al (1994) use Kalman filter techniques to estimate the volatility of foreign exchange rates using multivariate stochastic volatility (MSV) models. With the exception of multivariate GARCH and MSV models, which focus on the prediction of the volatility, it is usually desirable to use a structural state space model to forecast time series vectors (e.g.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Covariance estimation for multivariate conditionally Gaussian dynamic linear models

Triantafyllopoulos

2007

Journal of Forecasting

View full text Add to dashboard Cite

In multivariate time series, the estimation of the covariance matrix of the observation innovations plays an important role in forecasting as it enables the computation of the standardized forecast error vectors as well as it enables the computation of confidence bounds of the forecasts. We develop an on-line, non-iterative Bayesian algorithm for estimation and forecasting. It is empirically found that, for a range of simulated time series, the proposed covariance estimator has good performance converging to the true values of the unknown observation covariance matrix. Over a simulated time series, the new method approximates the correct estimates, produced by a non-sequential Monte Carlo simulation procedure, which is used here as the gold standard. The special, but important, vector autoregressive (VAR) and time-varying VAR models are illustrated by considering London metal exchange data consisting of spot prices of aluminium, copper, lead and zinc.Some key words: Multivariate time series, dynamic linear model, Kalman filter, vector autoregressive model, London metal exchange.

show abstract

Interest rate linkages: a Kalman filter approach to detecting structural change

Cited by 29 publications

References 26 publications

Credit risk-free sovereign bonds under Solvency II: a cointegration analysis with consistently estimated structural breaks

Credit risk-free sovereign bonds under Solvency II: a cointegration analysis with consistently estimated structural breaks

Variation of federal cost-share programs in the United States and the inducement effects on tree planting

Covariance estimation for multivariate conditionally Gaussian dynamic linear models

Contact Info

Product

Resources

About